Mid-1960s India was a period fraught with political, economic, and social upheaval. The two wars in 1962 and 1965 with China and Pakistan, a famine in 1965-66, combined with a currency devaluation in 1966 placed a enormous strain on the Indian economy and constrained its financial resources. In the sudden shift away from development-for-welfare to development-for-defense, one way the Indian government sought to increase its defense budgets were through a range of direct and indirect taxes on private enterprise. In 1965, the Indian Finance Ministry issued Income Tax rules that placed new curbs on expenses incurred on advertising.
This move affected advertising agencies since their commission-based revenues depended on the advertising budgets of their large manufacturer-clients. Advertising agencies decried the Income Tax rules as a disaster that could potentially spell nationwide economic crisis. Therefore, spurred by the Income Tax rules of 1965, advertising agencies spearheaded efforts to galvanize Indian manufacturers, the commercial press, auxiliary industry trade associations and employee unions to band together as a united front to overturn government curbs on advertising spending.
As a result of incessant lobbying, the Income Tax rules were reversed in 1966. What was also reversed in the process were previously held notions about advertising as wasteful expenses. This research paper presents an analysis of the assertions made by the advertising industry to the government. Importantly, it shines light on an important moment in Indian business history where advertising agencies rose to cultural prominence by not only galvanizing the Indian business community but also by creating new discourses around advertising as an institution of economic progress.